Glass and windows manufacturer Tecnoglass (NYSE:TGLS) met Wall Street’s revenue expectations in Q3 CY2024, with sales up 13.1% year on year to $238.3 million. On the other hand, the company’s outlook for the full year was close to analysts’ estimates with revenue guided to $890 million at the midpoint. Its non-GAAP profit of $1.08 per share was 8% above analysts’ consensus estimates.
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Tecnoglass (TGLS) Q3 CY2024 Highlights:
- Revenue: $238.3 million vs analyst estimates of $240.2 million (in line)
- Adjusted EPS: $1.08 vs analyst estimates of $1 (8% beat)
- EBITDA: $81.44 million vs analyst estimates of $76.56 million (6.4% beat)
- The company slightly lifted its revenue guidance for the full year to $890 million at the midpoint from $885 million
- EBITDA guidance for the full year is $275 million at the midpoint, above analyst estimates of $269.2 million
- Gross Margin (GAAP): 45.8%, up from 43% in the same quarter last year
- Operating Margin: 28.4%, in line with the same quarter last year
- EBITDA Margin: 34.2%, in line with the same quarter last year
- Free Cash Flow Margin: 7.5%, down from 12.8% in the same quarter last year
- Backlog: $1.04 billion at quarter end
- Market Capitalization: $3.30 billion
Company Overview
The first-ever Colombian company to trade on the NASDAQ, Tecnoglass (NYSE:TGLS) is a manufacturer of architectural glass, windows, and aluminum products.
Building Materials
Traditionally, building materials companies have built competitive advantages with economies of scale, brand recognition, and strong relationships with builders and contractors. More recently, advances to address labor availability and job site productivity have spurred innovation. Additionally, companies in the space that can produce more energy-efficient materials have opportunities to take share. However, these companies are at the whim of construction volumes, which tend to be cyclical and can be impacted heavily by economic factors such as interest rates. Additionally, the costs of raw materials can be driven by a myriad of worldwide factors and greatly influence the profitability of building materials companies.
Sales Growth
A company’s long-term performance is an indicator of its overall business quality. While any business can experience short-term success, top-performing ones enjoy sustained growth for multiple years. Over the last five years, Tecnoglass grew its sales at an exceptional 14.6% compounded annual growth rate. This is a great starting point for our analysis because it shows Tecnoglass’s offerings resonate with customers.
We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Tecnoglass’s annualized revenue growth of 15.2% over the last two years aligns with its five-year trend, suggesting its demand was predictably strong. 
This quarter, Tecnoglass’s year-on-year revenue growth was 13.1%, and its $238.3 million of revenue was in line with Wall Street’s estimates.
Looking ahead, sell-side analysts expect revenue to grow 14.5% over the next 12 months, similar to its two-year rate. This projection is noteworthy and illustrates the market sees some success for its newer products and services.
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Operating Margin
Tecnoglass has been a well-oiled machine over the last five years. It demonstrated elite profitability for an industrials business, boasting an average operating margin of 26.5%. This result isn’t surprising as its high gross margin gives it a favorable starting point.
Analyzing the trend in its profitability, Tecnoglass’s annual operating margin rose by 9 percentage points over the last five years, as its sales growth gave it immense operating leverage.
In Q3, Tecnoglass generated an operating profit margin of 28.4%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.
Earnings Per Share
Analyzing revenue trends tells us about a company’s historical growth, but the long-term change in its earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.
Tecnoglass’s EPS grew at an astounding 34.4% compounded annual growth rate over the last five years, higher than its 14.6% annualized revenue growth. This tells us the company became more profitable as it expanded.
We can take a deeper look into Tecnoglass’s earnings to better understand the drivers of its performance. As we mentioned earlier, Tecnoglass’s operating margin was flat this quarter but expanded by 9 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its higher earnings; taxes and interest expenses can also affect EPS but don’t tell us as much about a company’s fundamentals.
Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.
For Tecnoglass, its two-year annual EPS growth of 11.6% was lower than its five-year trend. We still think its growth was good and hope it can accelerate in the future.In Q3, Tecnoglass reported EPS at $1.08, up from $0.98 in the same quarter last year. This print beat analysts’ estimates by 8%. Over the next 12 months, Wall Street expects Tecnoglass’s full-year EPS of $3.40 to grow by 20.8%.
Key Takeaways from Tecnoglass’s Q3 Results
We were impressed by how significantly Tecnoglass blew past analysts’ EBITDA expectations this quarter. We were also glad it raised its full-year revenue and EBITDA guidance. Overall, this quarter had some key positives. The stock traded up 6% to $74.42 immediately following the results.
Indeed, Tecnoglass had a rock-solid quarterly earnings result, but is this stock a good investment here? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.
